Do Businesses Pay the Right Influencers?

Social media influencers are individuals that have grown a base of followers on various social media platforms including Twitter, YouTube, Instagram and Facebook. An influencer may be a celebrity, blogger, fashionista or even a hobby enthusiast. But, most importantly, social media has provided a forum in which a commoner can be transformed into a celebutante overnight. These individuals have developed a credibility, often within a specific niche or industry, such that their followers value their recommendations and may even follow their suggestions. A micro-influencer typically has a base of followers numbering between 1,000 to 40,000 as opposed to a macro-influencer who typically captures the attention of 40,000 to 1,000,00 individuals. However, whereas the impact of an influencer’s endorsement on brand awareness and engagement is more evident, the impact on customer conversion and revenues is less clear.

Brands have turned to influencers to feature or promote their products and services, although the commercial sponsorship of content is not always apparent. The two main types of influencer campaigns include product placement and sponsored content.  In product placement, the most classic marketing tactic, an influencer may briefly display the physical product or may interact with the product by “unboxing” and handling it, or by discussing features of a pre-released or exclusive product. In contrast, sponsored content is social media content that is generated by an influencer in partnership with a sponsoring brand. This type of marketing campaign can include tactics involving the product featured as either part of the storyline (“brought to you by”), interwoven into the visual content (integration), or by creating a larger theme across social media with multiple influencers (hashtag campaign) and even the brand sponsoring contests (giveaways) or funding unrelated content (“shout out”). These marketing tactics allow brands to either blatantly feature their product or subtly introduce it and may achieve different results depending on the chosen marketing campaign.

A multibillion-dollar industry centering around influencer marketing, which is the fastest growing method of customer acquisition online, has skyrocketed as companies invest in advertising on social media. Depending on an influencer’s reach, fees for a sponsorship can range from $100 to $10,000 per Instagram post; a macro-influencer can receive payments exceeding $1 million per post. Fees for sponsoring content on blogs can be thirty times more expensive than paying for a post on Twitter. Now influencers retain the services of branding agents and influencer marketing agencies to help with identifying advertising opportunities and growing audiences. Currently, influencers are commanding hefty prices, more than $75,000 per post, to provide negative reviews of products. The Federal Trade Commission has published guides for influencers and brands to articulate the general principles used in evaluating material connections between influencer endorsements/testimonials and brands. Essentially, influencers must disclose whether they have received cash payments or free products in exchange for their review (whether positive or negative) of a product or service.

As the price of marketing campaigns increases, companies will need to make decisions on how (or whether) influencer marketing fits with the goal of the brand. Approximately 19% of marketers surveyed by Association of National Advertisers did not feel that influencer marketing was effective. Marketing budgets may be better spent on promoting customer testimonials rather than buying audiences, especially since brands may not be able to control influencer content. Businesses will need to decide whether influencer marketing increases the vulnerability of the brand to negative feedback, and whether audience perception of a brand can be controlled. An influencer’s authenticity is often the most important characteristic to his or her audience, and influencer partnerships with brands may need to be more genuine. Brands should consider focusing on content that is user generated by their actual customers rather than paying influencers.